Answer (C) is correct . The fixed O/H volume variance occurs when actual activity levels differ from anticipated levels. It is an excellent example of cost allocation as opposed to cost control. Unlike other variances, the volume variance does not directly reflect a difference between actual and budgeted expenditures. The economic substance of this variance lies in the costs or benefits of capacity usage or nonusage. For example, idle capacity results in the loss of the contribution margin from units not produced and sold.
Answer (A) is incorrect because A labor price variance reflects a difference between the actual price of labor and the budgeted price of labor, which is useful information for cost control.
Answer (B) is incorrect because The materials quantity variance is the difference between budgeted and actual materials used during production. This is an important variance for cost control.
Answer (D) is incorrect because The difference between actual variable O/H and the product of the actual input and the budgeted variable O/H rate is useful information for cost control.
|
